Making sense of loyalty programmes

Points, tiers, paid membership or stamp cards: four loyalty programme types compared for pubs, restaurants, hotels and coffee shops.

Loyal customers are worth more than new ones. They visit more often, spend more per visit, and they cost you nothing to acquire. A loyalty programme turns that into something deliberate, and adds a good amount of extra revenue to your bottom line.

But there is a wide array of loyalty programmes on the market. To help you find the right one for your business and your customers, we have broken down the main differences between four common types used in the hospitality industry.

1. Point-based loyalty

The point-based programme is the most widely used. It is often described as 'easy to earn and easy to redeem'. It is straightforward and aims to encourage frequent, short-term purchases: points are earned per pound spent and translate into rewards or freebies. Dunkin' and Pizza Hut are two well-known industry examples.

2. Tier-based loyalty

Tier-based programmes give members ranks (silver, gold, elite) based on their spend. They are often used by higher-priced businesses such as airlines and hotel chains: Marriott Bonvoy and Chick-fil-A are examples.

Small rewards come as base offerings and increase in value at higher tiers. What makes this type attractive is that customers commit to spending more to move up the tiers and access even more benefits. The trade-off is that tier-based programmes are long-term oriented: customers do not usually get an immediate benefit.

3. Paid loyalty

Paid or VIP membership programmes create an element of exclusivity. Members pay a monthly or annual fee for access to a bundle of perks.

The model is best known from retail, with Amazon Prime the obvious example. In hospitality, BrewDog's 'Equity for Punks' comes under the same umbrella: it offered shares in the company, discounts in bars and online, and perks like an invite to the 'Annual General Mayhem', which in practice was a one-day beer and music festival.

4. Stamp or punch card

The stamp card is probably the simplest type, and one of the most effective. Customers earn a stamp for every purchase and exchange a filled card for a reward.

Stamp cards suit any type and size of business. They are a simple way to encourage customers back by promising something free in return for their loyalty, at a small cost to the business. Compared to other programmes they also have visual appeal: customers can see how many stamps they have left. They are a classic in coffee shops, and big chains such as McCafé have run them too.

To get the most from this type, opt for a digital version. A digital stamp card is more convenient for customers, with no missed stamps or lost cards, and it lets the venue collect valuable customer data along the way. That data feeds personalised marketing outreach.

Watch out for part two of this article, all about turning your loyalty programme into a success, with customer examples to inspire you.